This usually translates in to mental profits versus actual.
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Need 900% in 3 years- what would you do?
- Thread starter wekilishorts147
- Start date
To add to this, volatility trading is a very crowded space right now and short volatility is the next "bubble". Everyone can look at a VXX/UVXY chart and see the same thing, the difference between you and these guys is that they have resources/smarts that we will never be able to touch. It is too easy riding volatility down with every spike and simply being short VXX/UVXY hedged with SPX puts. That is usually a good sign to get out.Sure they make "those returns" and then they blow up. They only tell you about those 1-2 years they had 200% returns. They fail to mention their -80% years.
To add to this, volatility trading is a very crowded space right now and short volatility is the next "bubble". Everyone can look at a VXX/UVXY chart and see the same thing, the difference between you and these guys is that they have resources/smarts that we will never be able to touch. It is too easy riding volatility down with every spike and simply being short VXX/UVXY hedged with SPX puts. That is usually a good sign to get out.
Not necessarily, I'd need real proof to justify being worried. I'm already pretty tired of the jealousy/doubt of traders who either don't want to put the time and effort into properly learning this instrument, or are bitter that they took too much risk and got burned; of which I am neither. Reality is that risk is more or less 'limited' in the sense that the markets themselves would have to fail for this trade to be a failure, a lot less risky than trading one company. Risk management has been my number one priority. I would need an overnight increase of 300 percent to lose any significant amount of money right now, and it would have to happen instantly to get past my safeguards. I also have multiple accounts so I wouldn't lose everything if this were to happen, in fact I would assuredly still be in business. It would be a 'crowded' trade if the price of the underlying wasn't dictated by a much larger force. You couldn't squeeze me out of the trade without manipulating something much more influential than the group doing what I'm doing.
I don't just 'short and forget', this will lead to losses unless it's perhaps just a very small position. I have intricate knowledge of how every factor concerning the price of the etf behaves, and figure that's a necessity for anything in this business. It's a risk I'm comfortable taking, because the reward FAR outweighs it. There's realistically way riskier and less profitable risks people take in much higher numbers in this business.
I have traded a short VXX/UVXY long SPX put strategy for a few years now. I have watched the SPX put skew continue to steepen as well as VIX stay abnormally depressed. So I am by no means jealous or bitter. I am just telling you that short vol has become too popular a trade and regardless of how clever you think your strategy is, I promise you there is an outsized risk to match the outsized reward. But this is the elite trader forum so you are probably right.I'm already pretty tired of the jealousy/doubt of traders who either don't want to put the time and effort into properly learning this instrument, or are bitter that they took too much risk and got burned; of which I am neither.
I have traded a short VXX/UVXY long SPX put strategy for a few years now. I have watched the SPX put skew continue to steepen as well as VIX stay abnormally depressed. So I am by no means jealous or bitter. I am just telling you that short vol has become too popular a trade and regardless of how clever you think your strategy is, I promise you there is an outsized risk to match the outsized reward. But this is the elite trader forum so you are probably right.
I agree that VIX is too low at this moment, which is why I'm mostly in long term puts vs short monthly calls. Most of my accounts are in cash at this moment really. My argument is that regardless of how popular the trade gets, it's not as simple as a traditional short squeeze or mass panic to get an extreme price movement out of this. You'd literally need to shake up the entire index which is virtually impossible to do outside of the natural forces at play. The skew in options pricing as you say is curious, perhaps worrying. But that is an individual market, and perhaps almost fully explained by the increased participation in hedging volatility short positions. That is an independent market for the most part though, and would only concern me if I participated in it. The low VIX however does concern me, and I see that as the largest risk currently present for me. I see this as reason to reduce exposure and not to avoid participation however, I make most of my money from contango and as long as it's present I will make good money until it spikes...which is when I'll make even better money assuming I'll be prepared for it.
I would make a long term options play on some market or asset, a bet that have decent probability of panning out.So what would you do? Give up completely, buy call spreads on SVXY, something else?
Example I would bet on S&P 500 index reaching the level of 3000 within the next 3 years, a 20% increase. A deep out-of-the-money option for 0.20 cents that go to $2 is a 1000% increase.
Something like that I would look for. A long term trade that have a 70-80% chance of success.
Why is it that so many people these days insist on trading UVXY, it's such an abstract trading instrument, theres so many more liquid and simpler things to trade. Is that notion that people believe that because its esoteric, that there is an edge to be made because of lack of efficiency?
It has to pay the contango in the vix futures twice so it is designed to go down. Google Seth Golden. He is all over twitter, youtube and blogs describing in great detail how he has made $12m shorting it over 5 years.